Abandoned Retirement Accounts

Today I wanted to talk about a major problem that people in the US are having with retirement accounts that can be fixed by being diligent and aware as you enter the workforce.  The issue is not about not having saved enough for retirement, although that is an issue, but more that people lose track of retirement accounts and pensions. With the idea of spending your entire career for one company or in one location no longer commonplace, it can be very tricky to track your retirement accounts after you leave.  Companies have very little incentive to keep you informed of what’s going on in those accounts, and the requirements for notification are pretty lax, so the onus is on you to keep track of those accounts and make sure they’re being cared for.

Missing Retirement Benefits

The Pension Action Center at the University of Massachusetts estimates that retiree’s are owed up to $150 billion in unpaid pension benefits.  That’s a staggeringly large number, especially for money that you’ve earned throughout your life and simply don’t have access to when it’s needed.  MetLife, a company that takes over the oversight of company sponsored retirement plans, admitted it failed to pay 13,500 workers their owed benefits because it stopped trying to contact them after two attempts.  Many of these accounts were missing crucial information, such as names or social security numbers.

Search Requirement Legislation

There has been an attempt to introduce legislation to help with this issue, called the Retirement Savings Lost and Found Act which would greatly increase the ease with which you could find old retirement accounts.  However, there are some major issues with this legislation, namely that it reduces the effort companies have to put forth in order to contact those with accounts. If you don’t know about an account, or forgot you have one, making it easier to look for doesn’t particularly help in that situation.  With plan managers now having to take only two steps such as sending a certified letter of notice and checking to see if your address has been updated on their records. So, what does this mean for you?

Keep Track of Old Retirement Plans

As you get into your career and move around a bit, make sure you’re keeping track of your retirement accounts.  This is money that you’ve earned and will rely on when the time is right to retire, so there’s no reason not to make this a priority.  That being said, it can be very tricky, so getting help from a financial planner is a good idea, as they can roll over old accounts into either a new account or your current employers account, depending on the circumstances.  A wrinkle to this is perhaps you left your previous employer after a year or so and weren’t vested in the retirement plan and aren’t owed anything, in which case, it’s helpful to have someone you trust to help you go through all of that information and make sure you’re getting what you’ve earned.  

The big lesson here is that it pays to be vigilant early on in your career, so you’re not preparing to retire and miss out on money you’ve earned.  If you have questions, leave a comment or contact me and we’ll figure out what makes sense and track down some of these old accounts.